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Shanghai market contracts at midday as material producers, lenders fall

SHANGHAI'S key stock index fell in the morning session, led by materials producers and banks, after commodity prices tumbled and Shenzhen Development Bank Co. said profit may have slumped.

The Shanghai Composite Index declined 1.19 percent, or 22.69 points, to 1877.66 points.

The Shenzhen Composite Index, which tracks the smaller domestic market, was down 1.47 percent, or 8.68 points, to 580.04 points.

Commodity stocks led the declines after commodity prices tumbled yesterday as the slumping global economy continued to slash demand for raw materials. Crude oil fell below US$38 a barrel and gold declined the most in six weeks.

China Petroleum & Chemical Corp, Asia's biggest oil refiner, also known as Sinopec, fell 0.14 percent, to 7.08 yuan. Zhongjin Gold Corp, the country's second-largest by market value, retreated 3.46 percent to 35.45 yuan.

Shenzhen Development Bank Co, the Chinese lender controlled by buyout firm TPG Inc, said 2008 profit may have dropped 77 percent to about 600 million yuan ($87.8 million) as it set aside more provisions against bad loans to bolster its financial strength. The stock slumped 3.96 percent, to 9.47 yuan.

Bucking the downward trend, automakers gained despite China vehicles sales may rise about 5 percent this year, the slowest pace since 1998, as a slowing economy and rising job insecurity damps demand, the China Association of Automobile Manufacturers said yesterday.

SAIC Motor Co, China's largest carmaker, rose 3.89 percent to 6.14 yuan. Dongfeng Automobile Co, which makes light trucks in China with Nissan Motor
Co, added 2.91 percent, to 3.18 yuan.

Elsewhere, Air China Ltd, the nation's largest international carrier said its parent is in talks to buy all or part of East Star Airlines. The shares fell 3.16 percent to 4.29 yuan.

China Southern Airlines Co, Asia's biggest carrier by passenger numbers named Si Xian Min as its new chairman. Si was previously the carrier's general manager, it said. The shares eased 2.61 percent to 3.36 yuan.

Western Mining Co, China's fourth-largest maker of zinc concentrate said a unit of Goldman Sachs Group Inc reduced its holdings in the company. Goldman Sachs Strategic Investments (Delaware) LLC sold a total of 78 million shares between August 7 last year and January 9, or close to 3.3 percent of total shares outstanding, it said in a statement yesterday. The shares lost 2.75 percent to 7.07 yuan.


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